Rakon gains 7.5% after return to profit on growth in its core markets

Rakon shares gained 7.5 percent after the high-tech components maker returned to a full year profit. Photo: Getty Images

Rakon shares gained 7.5 percent after the high-tech components maker returned to a full year profit, benefiting from growth in its core markets and some non-recurring gains.

The Auckland-based company posted a profit of $10 million in the 12 months ended March 31 versus a loss of $13.6 million in the prior year. Underlying earnings before interest, taxes, depreciation and amortisation more than tripled to $12.1 million from $4.0 million and met guidance of between $10.7 million and $12.7 million. The shares rose 1.5 cents to 21 cents.

Rakon managing director Brent Robinson said the company - which designs and manufactures advanced frequency control and timing products - achieved growth in two of its three core markets: space and defence and global positioning, which contributed to a 7 percent increase in total revenue. Sales rose to $101.1 million from $94.7 million.

While revenue was flat revenue in its core market of telecommunications on a US dollar currency basis, margins had improved, he said. "The technology and solution design requirements for next-generation 5G telecommunication networks and applications is becoming clearer, with Rakon well positioned with its product and technology offering," Robinson said.

The bottom line result includes several non-recurring gains, including a gain from the sale of property in France of $2.1 million, with cash proceeds of $4.5 million, a gain from the partial sale of shares in Thinxtra of $1.9 million, with cash proceeds of $3.2 million. It also saw a net dilution gain on Thinxtra shares of $4.8 million, resulting from an equity accounted net asset gain following Thinxtra’s successful capital raising.

Robinson said the company achieved "solid progress" regarding manufacturing partnerships and platforms. Since the March 31 balance date, it has completed a buy-out of 51 percent of the shares of Centum Rakon India for US$5.5 million.

“The acquisition of Centum Rakon India is a pivotal strategic decision that gives us the opportunity to grow profits. Having total ownership and full decision-making control means that we can leverage the benefits that this established low-cost manufacturing platform offers," he said.

Rakon also moved from having net debt of $4.5 million to holding a $7.4 million cash surplus at the balance date, which allowed it to complete the acquisition of Centum Rakon India from its own resources.

The company also said that chair Bryan Mogridge will retire at the 2018 annual shareholders meeting. He had previously signalled plans to retire before his next re-election, and will be replaced by Bruce Irvine, who will seek re-election at the meeting.